When the European Commission announced antitrust proceedings against Google in mid-April, the most interesting part was not the complaint about the company’s sidelining of competitors in search results – an issue that the Commission had been discussing for years. The real news was the formal investigation into whether, in the words of the Commission, Google’s “conduct in relation to its Android mobile operating system as well as applications and services for smartphones and tablets has breached EU antitrust rules.

What the European Commission is acknowledging is that in a world where mobile is becoming the primary mode of access to the Internet for large numbers of people, controlling the dominant mobile operating system is crucial to Google’s business model and has an anticompetitive role in the Internet ecosystem as its search engine.

As this policy brief outlines, Android should not be analyzed for its dominance of the mobile operating system sector, since no company is really seeking to make money in that sector alone. Rather, each is using control of the operating system to strengthen its revenue in its core profit centers, whether Apple strengthening hardware sales, Amazon strengthening its ecommerce position, Microsoft its Office and other applications sales. Google for its part makes essentially no revenue from users of either its Android operating system or its search engine, but each plays a role in giving Google dominance in Internet advertising, especially its Adwords keyword-based advertising -- often called search advertising, but which in fact delivers up ads to search engines, Gmail and a range of partner sites.

Control of Android not only places Google apps in prime real estate on user phones but also delivers the critical engine of Google’s strength in advertising, namely detailed information on users. Such personal data is prized by advertisers and, as discussed below, gives Google a premium price per click on those ads compared to any actual or potential competitor in the keyword-based advertising sector. Control of Android for Google is therefore more akin to Microsoft’s promotion of its free Internet Explorer browser and other middleware, which were designed not so much to dominate those particular software sectors but rather to reinforce its core operating system dominance at the time.

In examining how Android generates critical data about consumers for Google, regulators should recognize the consumer harm from allowing a company like Google to extract and create such comprehensive profiles of each user. That harm, as discussed in the policy brief, includes not only any qualitative lost privacy, but the real economic harm of such a dominant player extracting such data at too little a price paid to users for that data and the economic harm that its advertisers can inflict on consumers through various forms of price discrimination that raise the costs of goods across the economy for consumers.